How do presidential elections affect the real estate market?

Presidential elections are a bit like dating. Candidates put their best foot forward for a year or so and then (like marriage) we find out who they really are once the deal is sealed. Beyond all the political talking points and policy promises though, what typically happens in the real estate market during an election season?

I asked a few knowledgable Sacramento area real estate professionals for their thoughts on how presidential races impact the real estate market. Here is what they had to say.

What do you think? Do you agree or disagree with the statements below? Anything you’d like to add? What do you expect to see happen in the real estate market during months surrounding the election?

Well I made a comment on a post the other day and said how magically the real estate market seems to be turning right before an election…historically cheap rates controlled by the Feds and all the TARP Banks magically stopping their release of REO’s at once have caused a shortage of homes available and now a bidding war/run up of prices…a coincidence? Naw….

Elections especially for the powers in place looking to be reelected need consumer confidence numbers and most are rooted in housing. Negative numbers and media reports affect any incumbent more than any PAC will ever do. The Treasury has an impact on softly instructing banks to hold assets off of the market but the reality in this year is those assets in most cases get sold off in the background to people previously tied to trading firms who now are in charge of hedge funds. The two things an election year ends up impacting the market is A) programs or views on how to resolve in this case the defaulting homeowners, any changes could be positive or negative and B) creating a mini bubble or what some might say is propaganda by simply creating what appears to be a rebounding market instead of a true market recovery, no impact of an election will be known until 6 months to a year after the election.

Last week I had Howard Blum on my show—Howard is an internationally respected economist who focuses on the housing sector and has a keen eye on political impact too (you might want to listen to that podcast).

That said, as an agent I think buyers are a little hesitant right now as they are unsure what will change. Also, there are some big changes coming in Jan 2013 with banks and duel tracking, meaning that if a borrower is trying to get a loan modification, the bank can NOT foreclose. This has got banks in a tizzy and many are selling off loans….I’ve had 2 short sales listings with Citibank just get sold off.

As far as what I think will be different based on who wins? According to Howard, Obama will win by a landslide and nothing much will change in housing….as he noted, Congress makes all the rules and most of them are not currently crafted to help the housing industry.

Sacramento has bottomed out in pricing. I think once the new year hits, this will become more evident and we will have a flurry of buyers who waited too long. Otherwise, I am seeing the main impact with lenders; buyers are still buying and sellers are still selling and people are still sticking their heads in the sand and losing their homes. Hopefully more people will attempt a loan modification or short sale as THAT is where we are going to see the greatest improvement.

The “chicken in every pot” election promise goes back a couple of centuries, and is constantly evolving, with both parties. A house to go with that pot? So far, the Feds have sent $2 billion towards California just to assist in house payments. What happens when that’s gone? They will worry about that after the election.

During a normal election year I believe an election generally has very little effect. Some buyers or sellers may hold off until after the election to act. That is they will wait to see who is elected and gauge how that will affect their business, work, benefits, etc. But this year it seems to be different, and I think it is having a very large affect. This is because the economy is the largest issue on voters’ minds, which makes it the most important topic for voters and anyone running for election/re-election. The housing sector is seen to be the key to the economy, if it goes up so will the economy. I believe that politicians are doing everything they can to turn the housing market around and make it look good before the election. This, I think will have a beneficial result in housing across the nation.

The dark side is that there is little motivation to make the difficult decisions; to make tough decisions and get done what is beneficial for recovery, but might in the short term harm the housing market before election, which means that reforms or even the basic act of foreclosing on homes is being put off, which will continue to drag the economy down and extend the recession because core issues are not being resolved as fast as they could be.

Then of course there is always the political spin, which keeps the quality of information low and everyone in the dark as to what is actually going on. This affects consumer opinion and purchasing patterns in many unforeseen ways.

I don’t really think much happens to the RE market as far a direct price changes but over time change will happen if major changes take place; lender financing, tax treatment, etc… basically any change to the layers that make up the value to real estate will have an effect to the RE market.

My political wood art: By the way, during the 2008 election season I did some political wood art as pictured below. I printed candidate images on pieces of wood and sold them for a few bucks each on Craigslist. It was a creative outlet and a fun way to help people engage in the political process. I don’t plan to do that again as I’m far too busy this time around, but it’s a good memory. If you want to know how I transferred images on the wood, just ask.

What do you think of the statements above? Your comments are welcome below.

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Comments

Just as Mr Wright mentions, there’s little effect. Some buyers may hold off their decision until the election, but it doesn’t mean people will go out in masses to buy/sell. As policies (specially tax policies) are revealed, changes may start to be seen but that only happens a few months after. In commercial real estate prices tend to be the same. And same phenomenon is seen, people holding back for some time but not significant changes.

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